In-depth Analysis of Blur's New Generation NFT Lending Protocol Blend

Recently, a certain NFT trading platform partnered with a well-known investment institution to launch a P2P NFT lending protocol called Blend, and also introduced an NFT loan purchase feature based on this protocol. This article will provide an in-depth yet easy-to-understand analysis of the core characteristics and product advantages of this innovative NFT lending protocol.

Core Features of Blend

Blend has the following key features:

• Peer-to-peer, perpetual lending model, no fixed maturity time, no need to rely on oracle.
• Lenders can customize the loan amount and annual yield, and publish loan offers.
• Borrowers can choose suitable terms from existing offers.
• If the lender needs to exit, the borrower must repay or refinance within 30 hours, otherwise they will face liquidation.
• Borrowers can choose to repay at any time.
• Supports the "buy now, pay later" model, allowing users to purchase NFTs through a down payment and loan.

Product Advantage Analysis

The core advantage of Blend lies in unifying non-essential elements, reducing system complexity, and realizing the flexible migration of lending relationships within the system. It prices risk and return through market competition, maximizing user satisfaction. This design concept has a unifying effect akin to "same tracks for vehicles and same script for writing."

Compared to traditional peer-to-peer lending models, Blend has achieved innovation in the following aspects:

1. The three key elements of the loan (, namely the collateral ratio, interest rate, and term ), have unified the term into a perpetual flexible model, significantly improving the liquidity issues for lenders.

2. Unified the lender exit and liquidation mechanism, which essentially means that liquidation is the result when no one is willing to take over the project.

3. Abandoning the traditional method of oracles determining the liquidation timing, the exit option is completely handed over to the lenders for flexible handling.

Although Blend superficially fixes terms such as the collateral ratio and interest rate, its highly flexible exit mechanism means that the actual effective terms will basically follow the market average. This is because:

• If the terms are significantly worse than the market level, the borrower is motivated to repay and choose other more favorable lending offers.
• If the terms are significantly better than market levels, the lender will have the incentive to exit and issue a new loan offer to obtain higher returns.

For borrowers, Blend meets their core needs in the following ways:

• The collateral rate and interest rate will adjust according to market levels.
• Guide better lending conditions by allocating incentive points to lenders.
• The use of perpetual and on-demand repayment settings has achieved complete flexibility in the loan term.

For lenders, Blend also offers multiple advantages:

• The collateral ratio and interest rate follow market levels, reducing risks.
• The exit mechanism is flexible, allowing for withdrawal at any time.
• Combines the custom advantages of a peer-to-peer model with the liquidity advantages close to a point-to-pool model.
• Set your own risk control standards and exit flexibly.

NFT Loan Purchase Feature

Blend has also launched an NFT purchasing model similar to home mortgage loans. Users can initiate a collateral loan while purchasing an NFT, obtaining ownership of the NFT with just a down payment. This feature not only enhances capital efficiency but also helps attract a large number of new users, promoting the rapid growth of Blend. It also reflects the synergistic effects that the platform's integrated ecosystem could achieve.

Other Design Details

According to the design document of a certain investment institution, a Dutch auction mechanism will be initiated when the lender exits. The interest rate will gradually increase from 0% to 1000%, and new lenders can submit offers at any time. If the interest rate reaches 1000% and there are still no takers, the borrowing party will be liquidated, and the collateralized NFT will be transferred to the current lender.

However, in the actual operation interface, what we see is the mechanism that the borrower needs to repay or re-borrow. This may be due to the fact that the actual situation involves two variables: the loan amount and the interest rate, while the original design only considered the interest rate as a factor. Nevertheless, the essence of both schemes is an attempt to transition the lending relationship to new terms that are most favorable to the borrower, only with slightly different operational methods.

It is worth noting that Blend has not yet empowered its platform token with depth. The token currently has governance rights to set various parameters and the power to activate the fee switch after six months, but there is still significant uncertainty regarding its future development.

Summary

Blend has significantly improved efficiency by unifying non-essential elements based on traditional peer-to-peer lending models. At the same time, its deep integration with the trading module has brought substantial improvements at the product level. However, in terms of token empowerment, Blend's performance remains relatively ordinary. Overall, as a new generation NFT lending protocol, Blend demonstrates strong innovative potential and market competitiveness.